Mason & Hanger to merge with Philadelphia company

Day & Zimmermann Inc., a privately held company based in Philadelphia, announced Wednesday a merger agreement with the Mason Co., parent company of Pantex Plant contractor Mason & Hanger.

The agreement, which would make Mason a subsidiary of Day & Zimmermann, is expected to close in late May. Terms were not announced.

Chuck Graves, Day & Zimmerman spokesman, said the company does not expect to need approval from the Department of Energy or Department of Defense.

Graves said the Pantex contract would remain with Mason & Hanger. No personnel changes are planned.

Government approval of defense contractor mergers is required in some instances. On Wednesday, for example, the Pentagon rejected a $2 billion merger between General Dynamics Corp. and Newport News Shipbuilding that would have created a single nuclear submarine builder.

According to the announcement, Mason's businesses will be folded into similar business units of Day & Zimmermann. Mason & Hanger, which manages the Pantex contract, would combine with Day & Zimmermann's Government Systems Group based in Philadelphia.

"This is a significant, strategic step for Day & Zimmermann," said Hal Yoh, chairman. "Mason & Hanger's manufacturing, engineering, base operations and security businesses fit perfectly with our core strategic focus. Our companies both specialize in providing the same kind of outsourcing solutions to many of the same valued customers."

Mason President Rick Loghry noted corporate culture similarities.

"Because of the sensitive nature of our businesses, safety and integrity of operation are paramount, as is an abiding commitment to quality, schedule and cost," Loghry said. "I am enthusiastic about the opportunities that will be created by the merger with Day & Zimmermann."

Those similarities in corporate culture are troubling, said Don Moniak, director of Serious Texans Against Nuclear Dumping.

"Whatever problems Mason & Hanger has at Pantex won't be solved," Moniak said. "They're committed to schedule and cost and not to safety."

Last September, Mason hired Quarterdeck Investment Partners as a financial adviser to explore its options as the Department of Energy studies how it will award plant contracts in the future.

Mason & Hanger has operated Pantex since the 1950s. It received a three-year contract for $900 million in 1996, later extended by a year.

One possibility is a so-called "gorilla" contract that would place operations of all DOE weapons complex plants under one agreement.

Graves said such speculation was premature, but that Day and Zimmermann was committed to Pantex.

"When Day & Zimmermann makes an acquisition, I can assure you we will make a vigorous bid to retain it," Graves said. "We're committed to this kind of business."

Day & Zimmermann, which had revenues of $1.080 billion in 1997, has 20 operating divisions with 140 offices and 16,500 employees in 75 countries.

Mason & Hanger had revenues of about $450 million in 1997 and employs more than 4,300.

Among Day & Zimmermann's holdings is the Lone Star Ammunition Plant, operated under a Defense Department contract since 1951, Graves said.

Its Energy Department contracts include the security contracts at the Los Alamos National Laboratory and the Waste Isolation Pilot Plant near Carlsbad, N.M.

Moniak said security at Los Alamos was judged less than adequate in a DOE report in October 1997.

The report summary called security at Los Alamos "marginal overall and specifically in the areas of program management, protection program operations and materials control and accountability."